July 29, 2016 report: “Ontario law governing NewLeaf internet sales has “deficiency”, Statutory Registrar acknowledges”
July 28, 2016 report: “NewLeaf Travel blocks reporter after TICO Clarifies report”
July 23, 2016 report: “Chat with Air Passenger Rights Advocate Lukacs re: urgent NewLeaf injunction”
Passengers on NewLeaf Travel Company (“Canada’s Ultra Low-Cost Travel Choice“) first flight (see CBC, Global News, CTV) seem excited but should NewLeaf passengers worry about its “financial woes” and how much/little are they protected when flying with NewLeaf?
Financial woes take centre stage
Financial Post reporter Kristine Owram wrote an insightful article, “NewLeaf Travel Co’s financial woes take centre stage as first flight takes off“. Let me highlight and expand on two points.
“NewLeaf is not actually an airline but rather a reseller of seats. It has partnered with Flair Airlines, a B.C.based charter service, to provide its aircraft and crews.“
How many Canadians know that NewLeaf is actually NOT an airline?! We will explore more what this means later.
” Last week, Lukacs [an air passenger rights advocate] took his challenge one step further and asked the court to shut down NewLeaf unless it can post a $3.74 million performance bond to compensate passengers in the event it folds, calling it a “shell company without significant assets.”“
This reporter has interviewed Air Passenger Rights Advocate Dr. Lukacs extensively in this earlier article (with video interview) and won’t repeat the rationale Dr. Lukacs laid out clearly in why he requested the “$3.74 million performance bond to compensate passengers in the event it folds“. (Note: Dr. Lukacs currently has an ongoing Federal Court of Appeal re NewLeaf and CTA see directory Federal Court of Appeal – Court File Number A-242-16 for more public court files.)
“Kinda like Expedia … but with wings” ?
Bloomberg TV host asked Young asked in this TV interview (video clip),
“So just explain that to viewers, you are not buying the airlines, you are not leasing the airlines, you are effectively acting as what? The intermediary between Flair and the consumer?”
Young’s answer on TV was ad slogan worthy: “we are kinda like Expedia … but with wings”.
In terms of passengers’ protection, this is comparing booking Air Canada or WestJet on Expedia to booking NewLeaf on NewLeaf’s own website which is two different matter completely.
You see, all Canadians that book their Air Canada or WestJet flights on Expedia, since these two airlines are full fledge airlines which strict licensing requirements refunding by the federal government, the passengers are much more protected.
When under oath and compelled by the Federal Court of Appeal, Young was less poetic and didn’t answer “Expedia … but with wings“. Young gave an essentially two words answer in his July 23 affidavit, NewLeaf is a “travel agent“.
As you can read in the above affidavit (a sworn statement of fact made under oath), Young was advised by NewLeaf CFO Brian Reddy that Travel Industry Council of Ontario (TICO), the legislated regulatory body tasked to protect the traveling Canadians in Ontario, considers NewLeaf a “travel agent for the purpose of contributing to its compensation fund“. In short, NewLeaf is seen as a “travel agent” in the eyes of TICO.
List of questions/problems with NewLeaf’s TICO registration and other issues:
- What is NewLeaf’s TICO registration status? Let this reporter repeat something that is legally important, according to Young’s sworn affidavit filed with the the Federal Court of Appeal, “[…] Travel Industry Council of Ontario (“TICO) considers Newleaf to be a travel agent […]”And s. 4 (1) (a) of the Travel Industry Act, 2002 states that,Prohibition against acting as a travel agent or travel wholesaler unless registered
4. (1) No person shall act or hold himself, herself or itself out as being available to act,
(a) as a travel agent unless the person is registered as a travel agent under this Act
NewLeaf so far does not have a “TICO registration” and is applying for one according to NewLeaf’s court filings with the Federal Court of Appeal.
In an extensive phone interview on Monday (July 25) with Ms. Dorian Werda, Vice President of TICO, Operations, confirmed for this reporter that NewLeaf still does NOT have a TICO registration and there is no fixed/guarantee date of when NewLeaf can obtain registration, possibly “in a couple of weeks” but there is no guarantee.
Now, it is only fair to ask what prior permission and from whom at TICO or other government bodies or authorities did NewLeaf obtain an exemption to the s. 4 (1) (a) legal requirement for NewLeaf to operate as a Travel Agent in the Hamilton Airport? Quoting the Travel Industry Act, 2002, there is a “Prohibition against acting as a travel agent or travel wholesaler unless registered“.
Does laws in Ontario still need to be followed? Or NewLeaf, because of its ultra-low-cost business model, is allowed to operate above the law without providing legislated legal protections to Canadians’ dealing with travel agencies in Ontario?
- How precisely TICO registration protects or fails to protect NewLeaf passengers?In the same extensive Monday interview with Ms. Werda from TICO, this reporter was told the “protection” applies in a very limited sense only to transactions occurred right at the physical Hamilton Airport NewLeaf check-in counters! Yes, those feet square metres of space! TICO registration is required only for the Hamilton Airport NewLeaf check-in counters!Lets use a specific example, 120 Hamilton passengers purchased their tickets online via NewLeaf website, how many of those 120 Hamilton, Ontario air passengers’ ticket purchases do you think are protected by TICO’s travel compensation funds?The right answer is not a single one of the 120 passengers. Because those 120 passengers bought their tickets online and TICO considers NewLeaf as a company domiciled outside of Ontario. A key point TICO clarifies for this reporter is that since NewLeaf’s ticketing, receipt issuing, call centre, etc all still reside in Manitoba, therefore NewLeaf’s domicile will still be Manitoba thus outside of the protection offered by Ontario’s compensation fund.
What would be covered are the costs (and cost ONLY) paid by NewLeaf passengers at the physical location of the Hamilton Airport NewLeaf check-in counters. For example, checked or carry-on bag fees or a plane ticket actually purchased NOT online but at the airport check-in counters. Thats it. And again, the protected portion is just the cost only.
According to Young’s July 23 affidavit again, this time paragraph #5 & #6. Only three provinces in Canada have enacted travel industry legislation – B.C., Ontario and Quebec. NewLeaf only flies in B.C. and Ontario. If TICO’s explanation is any guidance, this reporter has no reason to expect B.C.’s travel compensation funds would cover NewLeaf because it is a company domiciled outside of B.C.
In fact, one can ask, and it is clear from NewLeaf CEO Young’s own July 23 affidavit that there is NO travel industry legislation in Manitoba, the province NewLeaf is domiciled in! Thus it seems there are no travel industry legislated compensation funds available to NewLeaf flyers to cover “repatriation costs”.
NewLeaf suggested in Young’s July 23 affidavit that they rely on credit card issuers to hold the funds and that would “include holding all funds for any repatriation on any return flight booked by the passenger“. But it seems this view may not be well justified as Ultra Low-Cost and deeply discounted (compare to major airlines as NewLeaf advertised) one way return flight cost (the cost paid by the customers using credit card) will not likely be sufficient to buy a last minute Air Canada or WestJet plane ticket home.
And Dr. Lukacs argued similarly in his July 22 reply (PDF),
“Credit cards can refund only the fare paid by passengers to NewLeaf. They do not cover repatriation costs. For example, a passenger who paid NewLeaf’s low fare of $99 would have to pay 5-10 times that amount for a last-minute one-way Air Canada or WestJet ticket in order to get home.“
- The potential troubling implication of “customers paying for a seat and a seat belt”
Young said in the Bloomberg TV interview, “The unbundling of products and services such that customers choose and only pay for the things they want. NewLeaf Travel Company with our partner Flair sell you a seat and a seat belt and let you choose everything after that.“
The potentially troubling implication is whether passengers are risking being stuck away from their home city or in a far away “sun destination” if NewLeaf fails as a business. It seems that it makes sense for NewLeaf to come up with a better way other than credit cards or the insufficient TICO registration protection funds (given NewLeaf is a company domiciled outside of Ontario) to try to protect flying Canadians.
- Affordable but also safe and protected travelIn the Bloomberg TV video interview, Young shared the romantic story of meeting passengers who hadn’t flown for the last 15 years because they couldn’t afford to! Yes, giving Canadians across the country Ultra Low-Cost options to travel is great and commended.But when these Canadians who couldn’t afford to travel otherwise except on ultra-low-cost options, if something financially bad happen to NewLeaf as a company, wouldn’t they be facing a bigger nightmare as they will then be stranded away from home and try to rush to buy last minute expensive Air Canada or WestJet tickets to fly home?
Note 1: This reporter has tried repeatedly and unsuccessfully to arrange an interview with NewLeaf CEO Jim Young in order to let him answer various concerns and clarify things directly. Instead, Mr. Young sent his representative Mr. Orvel L. Currie, a partner at NewLeaf’s law firm, to talk to me. Unfortunately, Mr. Currie did not keep his promise to be interviewed today (Wednesday 3:30pm).